Analyzing the Current U.S. Electricity Transmission System and Its Main Caveats to Incentivize Long-term Investments

Abstract

This paper explains the way in which the current U.S. electric system contains insufficient incentives for long-term investments in transmission. Moreover, it highlights some key issues that should be considered to improve these investment incentives. The paper shows that, under the current U.S. transmission system, independent merchant investors, transmission rights’ holders, and generation firms may have disincentives for making socially beneficial transmission investments.